The insider trading scandal at EADS took a fresh twist today as French banks threatened legal action in a bid to cancel their purchase of €2 billion (£1.6 billion) of stock in Europe's aerospace and defence giant.

The banks instructed a lawyer to launch proceedings over the deal to buy bonds that were convertible into shares from Lagardère, the French media and defence group and a leading shareholder in EADS, in April 2006, shortly before the share price plunged.

The legal action comes amid a criminal investigation into claims that Lagardere offloaded a 7.5 per cent stake in EADS in the knowledge that Airbus, the aircraft manufacturing division of EADS, was about to announce a serious setback in the production of its flagship A380.

Daimler, the German carmaker, which cut its stake in the defence group by 7.5 per cent at the same time, has also been accused of insider trading, along with 17 former and current executives at EADS and Airbus, by the French Financial Markets' Authority.

Today's move was a further blow to EADS, creating greater uncertainty for the group as it seeks to overcome rising costs linked to the euro-dollar exchange rate and production delays at Airbus.

It also threatens to block Lagardere's plan to reduce its aerospace investment and focus on media activities.

Lagardere said it had received a letter from a lawyer representing Crédit Mutuel, a co-operative banking group, over the insider trading allegations.

The letter said Crédit Mutuel would seek a court order to annul the transaction unless Lagardere agreed to negotiate compensation.

"Lagardere will not give in to threats from Crédit Mutuel", the group said.

Crédit Mutuel, which is thought to have bought a stake of 0.2 per cent for about €50 million, refused to comment.

But Caisse d'Epargne, the French savings bank that agreed to buy 0.5 per cent of EADS when the bonds were issued, indicated that it was also prepared to sue Lagardere.

"We're not ruling anything out," said a spokesman.

Caisse des Dépôts, the French state-owned institutional investor that acquired a 2.25 per cent stake in EADS, has already said it could join legal action over the row.

Last month, Noël Forgeard, EADS' former joint chief executive, was placed under formal investigation on suspicion of insider trading over the sale of 360,000 shares for a total of €4,342,480.

Thomas Enders, Airbus' chief executive, says he also expects to be investigated after making €711,750 from exercising his stock options.

The announcement of delays to the A380 in June 2006 wiped €5.5 billion from EADS' share price.

Mr Forgeard, Mr Enders, Lagardere and Daimler say they were unaware of the delays when they offloaded stock and deny any wrongdoing.

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